Avigilon Corporation reveal financial results

7 Nov 2013

Avigilon Corporation announced its financial results for third quarter of 2013. All figures are stated in Canadian dollars unless otherwise noted.

Third Quarter 2013 Financial Highlights

• Revenue was $51.1 million, an increase of 101% over Q3 2012 revenue of $25.5 million.
• Gross margin was 53%, up from 51% a year earlier.
• EBITDA1 was $12.7 million, a 213% increase over Q3 2012 EBITDA of $4.1 million.
• Adjusted Earnings Per Share1 of $0.23, compared with $0.08 in Q3 2012 Net income rose to $8.6 million, a 298% increase from net income of $2.2 million in Q3 2012.

"Demand for our systems worldwide continues to grow rapidly, which is clearly reflected in our financial performance for the third quarter as we reached a milestone of more than $50 million in quarterly revenue," said Alexander Fernandes, president and chief executive officer at Avigilon. "Our strategies are working, and we will continue to invest to expand our global sales team, expand our product portfolio, and increase marketing efforts. Combined with healthy underlying growth in the high-definition surveillance market, these strategic investments position us well to deliver sustainable long-term growth."

Financial Review

Avigilon reported Q3 2013 revenue of $51.1 million, an increase of 101%, or $25.6 million, compared with revenue of$25.5 million for Q3 2012. Revenue growth continued to be driven by a strong rise in product sales volumes worldwide, reflecting greater customer adoption in existing markets, further penetration of new target regions and sales of recently launched products. In Q3 2013, Avigilon experienced year-over-year sales growth between 46% and 115% in all six of its key target geographic regions.

Gross margin was $27.2 million in Q3 2013 (53% of revenue), compared with $13.0 million (51% of revenue) in Q3 2012. The increase in gross margin percentage reflects higher-than-typical mix of software sales in Q3 2013 due to the recent launch of Avigilon Control Center 5.0, as well as the ongoing effects of greater purchasing power, economies of scale and improved manufacturing efficiencies. Although the Company's gross margin increased year-over-year, management does not expect significant additional gross margin expansion in the near term due to the Company's focus on rapid growth in revenue and market share.

Selling and marketing expenses in Q3 2013 were $10.0 million, a $4.0 million increase compared to $6.0 million in Q3 2012. The increase reflects planned investments to significantly expand the Company's global sales team and brand awareness, which it believes will drive future revenue growth. As a result of these ongoing investments, sales and marketing expenses could increase as a percentage of revenue in the near-term, but over the longer-term, the Company expects selling and marketing expenses as a percentage of revenue to decline.

Research and development (R&D) expenses, net of related income tax credits, were $2.3 million for Q3 2013, a $1.1 million increase compared to $1.2 million in Q3 2012. Gross R&D spend was $3.2 million in Q3 2013, compared to $1.7 million in the prior year. The growth in spending is consistent with the Company's plan to increase its development team to further enhance and expand its product offering. Avigilon expects to continue to increase its R&D investment to support new product development.

General and administrative expenses (G&A) for Q3 2013 were $3.9 million, an increase of $2.2 million from Q3 2012. The increase is primarily due to additional personnel in finance, customer service and related areas to support the Company's rapid growth. The Company expects continued increases in G&A expenses in line with its growth plans, but believes these increases will occur at a slower rate than revenue.

EBITDA was $12.7 million in Q3 2013, an increase of $8.7 million, or 213%, compared to $4.1 million in Q3 2012. The year-over-year improvement largely reflects the Company's increase in revenue and improved gross margin.

Q3 2013 net income was $8.6 million, up by $6.4 million, compared with net income of $2.2 million in Q3 2012. Earnings per share were $0.22 (basic) and $0.21 (diluted) for Q3 2013, compared to $0.07 (basic) and $0.06 (diluted) a year earlier. Adjusted earnings per share, which the Company defines as earnings before share-based payments, foreign exchange gain/loss, business acquisition costs and related tax effects, were $0.23 in Q23 2013 compared with $0.08 in Q3 2012.

As at September 30, 2013, Avigilon had cash and cash equivalents of $34.2 million, and 39,986,934 basic and 40,314,595 diluted shares outstanding.